Caltex reports good start to 2013

Caltex Australia
chief executive
Julian Segal
has voiced confidence in growth opportunities in marketing and distribution despite a slowdown in earnings growth in the March quarter.

Mr Segal said Caltex’s diversity across geographic areas and industries provided strength while also offering plenty of pockets of growth.

“What’s good about Caltex is the growth is not coming from any one ­single particular area; that’s why I am so confident that the business is so very robust," Mr Segal told The Australian Financial Review after the annual shareholder meeting on Thursday.

He pointed to opportunities for expansion within the many sectors Caltex sells to, including mining, agriculture, aviation, lubricants and marine. At service stations, site upgrades invariably triggered an increase in sales of higher-margin premium fuels, he said.

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In the first quarter, earnings before interest and tax in marketing and distribution edged up 2 per cent to $190 million. In refining, earnings surged to $43 million up from a $60 million loss, due to higher margins, but Mr Segal said the improvement wouldn’t last.

Total replacement cost profit was $146 million, up from $69 million.

Caltex’s marketing business has had growth of 11 per cent a year on average over the past five years but Mr Segal said there were “ups and downs."

He flagged more acquisitions were likely after two bolt-on deals last year.

“These are businesses that we know well, that we can integrate very quickly and we can manage very well, so there’s really very little risk, operational and commercial," he said.

On the question of Caltex’s amassed $1 billion of franking credits, chairman
Elizabeth Bryan
said the board had decided “this was not the right time" to make extra payments to shareholders to release the credits.

Ms Bryan said the board would review the capital management strategy, including the franking credit balance, once the work to convert the Sydney plant was completed.